SEC and CFTC Agree to Divide Oversight of Crypto Assets and Prediction Markets

The SEC and the CFTC have brokered a jurisdictional peace accord to resolve long-standing turf battles that previously hindered regulation of crypto and prediction markets. Paul Atkins, the chair of the Securities and Exchange Commission, and Michael Selig, chief of the CFTC, have been meeting regularly to map out clear jurisdictional boundaries.

The two men share a long-standing working relationship in both regulatory matters and private practice.

Most recently, Michael Selig worked as the chief counsel of Paul Atkins’ Crypto Task Force before he was confirmed as CFTC chief late last year. Their cooperation stands in contrast to the Biden years, when the SEC clashed with the CFTC over crypto regulation. Under then-SEC chair Gary Gensler, the SEC took the position that nearly all digital coins aside from Bitcoin were securities.

The CFTC argued that most crypto fell under its watch as commodities, though Gary Gensler won most of those battles. The digital asset industry is now valued at $3 trillion. The new accord assigns the CFTC responsibility for event contracts on prediction market platforms.

The SEC will take the lead on derivatives in prediction markets of stocks and bonds that meet the legal definition of a security. So far, enforcement has been limited. The Department of Justice and the CFTC filed one enforcement case against a US Army intelligence officer.

The officer, Gannon Ken Van Dyke, allegedly used insider knowledge of the capture of Nicolas Maduro to earn $400,000 on Polymarket, according to the agencies. US regulators told On The Money "Stay tuned" when asked about the lack of enforcement cases on suspicious trades in futures and prediction markets surrounding the Iran war and other events.

New York Post reported that additional cases are in the works as the agencies pursue a streamlined approach.

"These guys get along great," one regulatory insider who knows both men told On The Money. The cooperation is expected to produce a thorough investigation of suspicious trades that have drawn public attention. During the Biden years the uneven regulatory framework for crypto allowed major scandals like the Sam Bankman-Fried fraud case to go unnoticed until it was too late.

The current effort by Atkins and Selig aims to avoid similar regulatory gaps. New York Post reported that the two continue comparing notes on rules for the $3 trillion sector.